By Arra B. Francia, Reporter

RCBC Securities, Inc. sees the market ending at the 9,500 level by the end of 2018, fueled by the continued positive outlook on the Philippine economy.

“We expect that the market will sustain its growth. Our end of the year forecast is 9,500… this can be subject to further upgrading moving forward,” RCBC Securities Research Head Raul P. Ruiz said during the brokerage firm’s annual stock market briefing in Makati City on Monday.

RCBC Securities said the projected 6.7% growth in the Philippine economy is the key reason for the rise in the Philippine Stock Exchange index (PSEi). The company noted the Philippines is also seeing the benefits of having better ties with China, citing higher investments and tourist arrivals from the economic giant last year.

Citing figures from the tourism department, the brokerage said that Chinese tourist arrivals accounted for 14% of the total travelers to the Philippines last year. Chinese tourists ranked third in the most arrivals, following South Korea and the United States.

Investments from China have also started to come in, beginning with President Rodrigo R. Duterte’s visit to the country last year where he secured $15 billion in investments. In comparison, investments from China amounted to only $60 million from 2011 to 2016.

The brokerage firm said this bodes well for the Philippines, citing China’s $9.6-billion investments in Cambodia from 2004 to 2013.

However, RCBC Securities said the PSEi is already expensive, moving above its historical average of 14 price to earnings ratio (P/E), trailing instead a ratio of 18 P/E.

“For so long as the prospects of the economy is better, there is justification for the market to rise further…Other (global) markets also rallied, better than the Philippine market,” Mr. Ruiz said. 

With the rise of the main index, corporate earnings are also expected to increase by 12% in 2018. This is higher than RCBC Securities’ forecast of 9% growth last year.

Ayala Land, Inc. is seen to be one of the top advancers this year, pushing the property sector to jump by 17%. Earnings of holding firms are projected to rise 11%, while consumers stocks will most likely record a 12% uptick.

RCBC Securities’ stock picks include: D&L Industries, Inc., noting its recent partnerships with US-based firms, Puregold Price Club Corp., and Robinsons Retail Holdings, Inc. for consumer stocks, ALI and Vista Land & Lifescapes, Inc. for property, Ayala Corp. and GT Capital Holdings, Inc. for holding firms, Megawide Construction Corp. for infrastructure play, Bloomberry Resorts Corp. for gaming, and EastWest Bank for the banking sector.

RCBC Securities did not choose stocks from the telecom industry due to concerns over the entry of a third player. The mining industry is also expected to be hit by higher mining taxes, while the power and energy sector may be affected by declining electricity selling prices, among others. 

Meanwhile, the brokerage firm said rates hikes in the US may affect the local bourse, as this would prompt the Bangko Sentral ng Pilipinas to increase rates as well. 

RCBC Securities is also cautious on the number of capital-raising activities lined up this year, such as the follow-on offering by the Philippine Stock Exchange, Inc., and P110-billion stock rights offerings by Metropolitan Bank and Trust Co. and Bank of the Philippine Islands, as they could “sap market liquidity, stalling the market’s climb.”

By Krista A. M. Montealegre,
National Correspondent

THE ENTRY of Shenzhen Stock Exchange into the Philippine Stock Exchange (PSE) faces regulatory hurdles ahead of the plan of the local bourse to tap the equities market.

“On the investment, we are not quite sure if they can meet the timetable kasi for them when they invest internationally, they need the approval of their (Securities and Exchange Commission),” PSE President and Chief Executive Officer Ramon S. Monzon said in an interview last week.

The PSE official announced in October that it is wooing its counterpart in China to invest in the local stock market, a move that may set the stage for the establishment of a Manila-Shenzhen trading link that will give Chinese investors access to shares listed in the Philippines and vice versa.

“May timetable kaming hinahabol so we’re trying to see how we can work that out,” Mr. Monzon said.

The Philippine SEC cleared the P3.16-billion stock rights offering (SRO) of the local bourse involving the sale of up to 11.5 million shares priced at P275 apiece. The deal is set next month.

Of the net proceeds, P1.58 billion will “(service) future corporate debt accessed through bridge financing” for its acquisition of Philippine Dealing System Holdings Corp. (PDSHC).

The PSE has already taken term loan facilities from BDO Unibank, Inc., Bank of Commerce, Metropolitan Bank and Trust Co. worth P1.15 billion, for the acquisition.

The SRO is a necessary step in the PSE’s acquisition of PDSHC, as it will bring down broker ownership to less than 20%. Bringing down the ownership of trading participants in the local bourse is a key feature in securing the SEC’s approval for the merger.

SEC approval for the PSE-PDSHC merger is one of the final steps in closing the deal that began back in 2013, when the PSE proposed to merge the two markets for synergies in operations. To recall, the Philippine Competition Commission approved the merger last December 2017.

The remainder of the SRO proceeds will be used for product development and working capital requirements, as the PSE moves to its new headquarters in Bonifacio Global City, Taguig by the first quarter of 2018.

CHELSEA Logistics Holdings Corp. (CLC) has tapped Japanese firm Kegoya Dock Co., Ltd. for the construction of a roll-on/roll-off (Ro-Ro) passenger ship, as the Philippine company ramps up its fleet expansion.

In a statement on Monday, CLC President and Chief Executive Officer Chryss Alfonsus V. Damuy said the contract with Kegoya Dock includes an option for additional three units to be delivered between 2019 and 2020.

The firm led by Davao-based businessman Dennis A. Uy said the Ro-Ro ship is designed specifically for the Philippine market.

The new ships are expected to modernize the company’s fleet and improve safety and reliability.

“Shipping and logistics business is a long-term business as it takes 2 years to 3 years to acquire new ships. However, once these new vessels are put into operation, they will deliver better cash flows for the Company as the brand new ships have very minimal downtime and very low maintenance costs,” Mr. Damuy was quoted as saying.

At present, CLC has 21 Ro-Ro and passenger vessels, aside from owning 15 tankers, eight tugboats and four cargo ships. Through the 2GO group, CLC has an additional 16 Ro-Ro and passenger vessels.

Last year, CLC acquired Batangas-based passenger and cargo operator Starlite Ferries, Inc. and its subsidiaries. Starlite and its units have 14 vessels, including five new Ro-Ro passenger vessels that were acquired in 2016 and 2017. It uses its Ro-Ro vessels at the ports of Batangas, Calapan, Puerto Galera, Roxas and Caticlan.

PNX-Chelsea Shipping Corp., a fully owned domestic subsidiary, secured three vessels, while another unit Trans-Asia Shipping Lines, Inc. also acquired a cargo vessel with a 700 twenty-foot equivalent unit capacity late last year.

In November 2017, the company had also fully acquired integrated logistics solutions provider Worklink Service, Inc.

“[With] the newly acquired vessels and tugs, and the newly built vessels which are soon to be delivered, [this] will bring Chelsea Logistics another step closer to fulfilling its commitment to growth in order to realize more value for our stakeholders, from the investors to the consumers,” Mr. Damuy said.

Shares in CLC closed 1.31% or 11 centavos lower at P8.31 each on Monday. — Anna Gabriela A. Mogato